Bill West, an employee at Baldor Electric Co., works inside the company's factory in St. Louis on June 3. A new government report shows the economy sank at a pace of just 1 percent in the second quarter of the year.

Jeff Roberson/AP

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New York

It looks as if the worst of the Great Recession is finally behind the nation.

On Friday, the Commerce Department reported that second quarter Gross Domestic Product (GDP), a broad measure of the nation’s production of goods and services, declined by a 1 percent annual rate.

This was a big improvement over the first quarter, which was revised downward to a drop of 6.4 percent annual pace compared with an earlier estimate of 5.5 percent. The sharp change is prompting some economists to wonder if the economic rebound in the second half might be stronger than expected.

“It sets up for a much stronger second half of the year,” says Mr. Canally. “Business has pared inventory, cut employment almost to the bone, and now they are ready to ramp back up as soon as the economy gets better.”

One area that may show improvement in the second half of the year is the automobile industry. The so-called “cash for clunkers” program is so successful that dealers have already gone through the $1 billion set aside by the government for the program. The US House approved an additional $2 billion for the program Friday afternoon.

“They sold 250,000 cars in a week. That is a rate of 12 million cars a year and we’re only making 7 million cars,” explains Canally.

However, it’s not clear if that program will continue. According to news reports, the Department of Transportation has told car companies to stop using the program since it’s out of funding. But other reports indicate the White House wants to continue the program.

The latest GDP estimate also indicates that consumers are continuing to keep their wallets in their pockets. In the second quarter, consumption fell at a rate of 1.2 percent compared with a gain of 0.6 percent in the first quarter. In the first quarter, stores were heavily promoting goods that did not sell in the holiday period.

“It looks as if people are still buying things they need, not things they want,” says Canally.

On Tuesday, the government will report personal income and spending for June. “It will help us gauge the momentum going into the third quarter,” says Mr. Brown.

Housing continued to be a drag on the economy, dropping at a 29.3 percent rate. However, this was an improvement over the prior quarter when it fell at an annual pace of 38.2 percent.

Recession looks worse after revisions

This is the fourth consecutive quarter of declining economic activity, and the first time since the Great Depression the economy has shrunk for this long.

The latest economic data reflects major revisions made by the Commerce Department. Most of the data was revised downward. For example, in its new data, the Commerce Department indicated 2008 grew at an annual pace of 0.4 percent instead of the 1.1 percent it had reported earlier.

“The revisions make the recession look worse than it did before,” says Canally. And, Mr. Brown points out, the latest numbers will also be revised.